U.S. Stocks Drop as Traders Weigh Odds for Steep Fed Rate Cut

Technology and health care companies drove U.S. stocks to a lower finish Monday as the market fell for a second straight day following a run of record highs.

The selling came amid growing speculation on Wall Street that an unexpectedly strong pickup in U.S. employment growth last month may keep the Federal Reserve from aggressively cutting its benchmark interest rate. Many investors still expect a cut of a quarter percentage point, but fewer are now expecting a half-point reduction.

The S&P 500 fell 14.46 points, or 0.5%, to 2,975.95. The index is now about 0.7% below its all-time high set Wednesday.

The Dow Jones Industrial Average slid 115.98 points, or 0.4%, to 26,806.14. The Nasdaq composite lost 63.41 points, or 0.8%, to 8,098.38. The Russell 2000 index of smaller company stocks dropped 14.24 points, or 0.9%, to 1,561.39.

Major stock indexes in Europe also finished lower.

The Fed’s benchmark interest rate currently stands in a range of 2.25% to 2.5% and the central bank has not cut rates since the Great Recession in 2008. Last year, Fed officials raised rates four times, in part to stave off the risk of high inflation and in part to try to ensure that they would have room to cut rates if the economy stumbled.

Investors will be listening closely for any hints on the central bank’s interest rate policy on Wednesday and Thursday, when Powell delivers the Fed’s semi-annual monetary report to Congress.

Besides keeping an eye on the Fed and on any developments with the ongoing trade talks between the U.S. and China, investors are looking ahead to the flood of earnings reports that companies are set to begin releasing later this month.

Technology and health care stocks led the market’s slide Monday. Apple dropped 2.1% and Cardinal Health slid 1.5%. Communication services companies also declined broadly. Google parent Alphabet fell 1.4% and TripAdvisor lost 4.3%.

Banks also declined. Bank of New York Mellon slid 3.4%.

Traders shifted money into U.S. government bonds and sectors seen as less risky, including household goods makers and real estate. Conagra Brands gained 1.5% and AvalonBay Communities added 1.1%.

Energy stocks rose along with the price of crude oil. Helmerich & Payne gained 1.1%.

Bond prices fell, shedding early gains. That sent the yield on the 10-year Treasury note to 2.05% from 2.04% late Friday. Bond yields fell through much of June as investors’ expectations of a Fed rate cut increased.

Deutsche Bank was among the market’s more notable movers Monday. The struggling German company tumbled 6.1% after it disclosed plans to cut 18,000 jobs by 2022 as it shrinks its investment banking division.

F5 Networks slid 3.8% after an analyst at Goldman Sachs downgraded the stock, saying the provider of cloud computing services for mobile apps faces risks amid weaker short-term business spending and rising competition.

Energy futures closed mostly lower. Benchmark crude oil rose 15 cents to settle at $57.66 a barrel. Brent crude oil, the international standard, fell 12 cents to close at $64.11 a barrel. Wholesale gasoline fell 3 cents to $1.90 per gallon. Heating oil declined 1 cent to $1.90 per gallon. Natural gas rose 2 cents to $2.40 per 1,000 cubic feet.